Euro: Spikes higher against US Dollar on Treasury buybacks – Danske Bank

The Euro edged higher against the US Dollar after the US Treasury announced increased buyback volumes of longer-dated Treasury bonds, flattening the bond curve and bringing the 10-year yield below its peak on Tuesday. The 10Y UST currently stands at 4.64%, 10 basis points below its high on Tuesday. In the US, the FOMC minutes from their July meeting revealed mixed views on inflation, with some participants suggesting policy tightening might be necessary if inflation did not decline.

Meanwhile, final inflation data from the euro area confirmed the flash estimate of 2.9% year-on-year, with core inflation at 2.5% year-on-year. Underlying inflation measures remained relatively unchanged, indicating that price pressures have not significantly increased following the energy shock. The Q2 Labour Cost Index in the euro area eased to 3.1% year-on-year, suggesting that wage pressures are moderating and should remain a disinflationary force.

The ECB is expected to raise rates only once more before September. EUR/USD is now consolidating below 1.1700 after reaching its highest level since late May. Bullish traders await a move above the 1.1700 mark before increasing their bets on the US Dollar, which has stabilized following the US Treasury's bond buyback plan. Gold and major altcoins have also been impacted by the recent developments.